Sandra Wyant has come across tantalizing clues that she believes point to a gradual turnaround in Vancouver’s tepid housing market.
The new president of the Real Estate Board of Greater Vancouver sees modest but encouraging signs of a stalemate easing between buyers and sellers. Sales volume in the Vancouver region fell 18.3 per cent in March, compared with the same month in 2012, but there is a silver lining: Decreases in year-over-year sales have slowed since last fall, when the number of homes sold tumbled nearly 27 per cent. Another clue? An industry statistic known as the sales-to-listings ratio has improved in Greater Vancouver. “There seems to be more of a meeting of minds going on,” Ms. Wyant said in an interview.
After a pricing slump that began in the spring of 2012, it means that a recovery – albeit tenuous – for Vancouver real estate is finally within sight, she said. After house prices in Greater Vancouver more than doubled from 2004 to 2011, they fell roughly 6 per cent last year. Prices are expected to be flat or slightly down this year, before a rebound in 2014, housing experts say.
Vancouver and Toronto have been the focus of Canada’s cooling housing market, with sales volume slumping in both markets. But it is in Vancouver where residential resale prices have fallen while Toronto has still managed to eke out small pricing gains.
To arrive at the sales-to-listings ratio, take the number of homes sold in a month and divide it by the number of active listings for that same month. With March’s 2,347 sales divided by 15,460 active listings, that equals a ratio of 15.2 per cent – a statistical reading for being a balanced market, but just barely.
Real estate agents consider it a balanced or neutral market in the Vancouver region when the ratio is between 15 per cent and 20 per cent. It is deemed a buyer’s market below 15 per cent and a seller’s above 20 per cent.
Cameron Muir, chief economist at the B.C. Real Estate Association, cautioned that such numbers are rough guidelines, and it’s too early to declare that Vancouver is swinging back toward a seller’s market, let alone becoming red-hot again. “I don’t think anyone expects to see prices accelerate any time soon like in the previous run-up,” Mr. Muir said.
As prices in Greater Vancouver peaked last May, Jordan Skinner bought a one-bedroom condo for $202,500 in Port Coquitlam. Mr. Skinner, 29, couldn’t afford the high price tags in the City of Vancouver, but with low interest rates, he qualified for financing for an entry-level condo. “I don’t regret it. I quite like it,” said Mr. Skinner, who works in customer service at a credit union. “You have to get out of that mindset of a housing bubble. I’m not panicking at all and I’m not looking to make a quick buck.”
He took out a mortgage that carries a 30-year amortization last May, two months before Ottawa reduced the maximum period on government-backed mortgages to 25 years from 30 years. Real estate experts say last July’s change, which knocked some first-time buyers out of the market, contributed to the slowdown in housing sales in Vancouver, Toronto and other major cities.
Mr. Skinner, who came up with a 5-per-cent down payment, noted that longer amortization periods result in higher interest costs for consumers. He opted to make weekly mortgage payments, effectively cutting more than four years off the loan’s original 30-year amortization time.
Tsur Somerville, a professor at the University of British Columbia’s Sauder School of Business, said sluggish prices could be in store for Vancouver for the rest of 2013, but a crash landing is unlikely. “Given where interest rates are, it would be silly to expect a large change in prices,” he said. Still, Prof. Somerville cautioned that if interest rates skyrocket and if there is a major meltdown in financial markets, then Canada’s housing market, not just Vancouver’s, would face turmoil.
The Vancouver area’s residential sales volume began weakening in the fall of 2011. Buyers are waiting for further softening in the market while sellers are holding out for better bids or pulling their homes off the multiple listing service if no decent offers emerge. Benchmark house index prices in Greater Vancouver peaked at $625,100 last May for detached homes, townhouses and condos. Index prices (which strip out the most expensive properties) fell to $588,100 in January, a 5.9-per-cent drop from last May. Monthly prices edged up slightly to $590,400 in February and $593,100 in March. Last month’s index price is down 3.9 per cent from $617,100 in March, 2012.